The Berejiklian government may not be able to afford a series of inland dam projects and raising the wall of Sydney’s biggest reservoir at Warragamba, according to internal treasury emails revealed in budget estimates.
The emails between treasury officials reveal concerns that WaterNSW will be unable to finance the projects, including lifting the Wyangala Dam wall, as cost blowouts rise into the billions of dollars.
A 10-metre increase in Wyangala’s dam wall, originally identified in 2019 as a $650 million project, could now cost as much as $2.1 billion, documents reported by the Herald this year show.
Warragamba’s wall raising by as much as 17 metres will now cost $1.6 billion, an email released on Monday shows, up from $700 million when the idea was first floated in 2016.
In one email exchange on March 31 last year hours after Water Minister Melinda Pavey issued a media release headed “Next steps to fast-track delivery of new dams”, senior Treasury officials pondered how WaterNSW could stump up the necessary funds.
One official asks bluntly, “Where is the money coming from?” according to the exchange secured as part of a freedom of information request by consultants Slattery & Johnson.
By the following morning, another official responds that WaterNSW can’t even cope with a blowout in initial costs: “Besides WNSW debt funding being a near impossibility given its headroom, not to mention COVID, $200 million appears to be a lot of money to spend while not preempting an investment decision … even $80 million raised eyebrows.”
The issue had clearly been causing angst for some months. In December 2019, one Treasury official noted in an email that he had Treasury advice that Water NSW would not be given “an equity injection for these rural projects … because they will not provide a return on equity to govt”.
In her response on Monday to estimates, Ms Pavey defended the plan to raise Wyangala and increase its holding capacity by 1800 gigalitres saying it would increase water security in the Lachlan River by capturing more water during flood events.
Ms Pavey also said the cost blowouts were partly the result of higher offset costs to compensate for environmental damage. These offsets are now estimated to be “up to $500 million”, compared with the previous estimate of up to $140 million.
Cate Faehrmann, the Greens water spokeswoman who submitted the documents to estimates, said “once again, the Water Minister couldn’t give a straight answer today as to why she is charging ahead with these extremely controversial new dam projects”.
“No evidence has been provided that these dams will increase water security, yet despite this the minister is directing WaterNSW to do something that puts its investment credit rating at risk,” Ms Faehrmann said.
“Leaked treasury emails also reveal that the government does not want these dams on their books and may require WaterNSW to debt fund them itself.”
The Herald sought comment from Ms Pavey about Warragamba Dam’s cost blowout. Her office directed inquiries to Stuart Ayres, the Minister for Western Sydney, who is in charge of the project.
A spokeswoman for Mr Ayres said the final cost estimate for Warragamba, “will not be known until the Environmental Impact Statement (EIS), final business case and detailed design are completed, any conditions of planning approval are known, and a competitively priced contractor is selected”.
“No final investment decision will be made until all environmental, cultural and financial assessments and planning approvals are complete,” she said.
Harry Burkitt, a campaigner for the Colong Foundation for Wilderness, said Warragamba was “nothing but a $1.6 billion subsidy to the floodplain developers of western Sydney”.
“Raising Warragamba Dam wall is an obscene waste of taxpayers money which will fail to alleviate flood risk and do enormous cultural and environmental damage to the Blue Mountains,” Mr Burkitt said.
In his response to estimates, Jim Bentley, the chief executive for water with the Department of Planning, said he would work to ensure WaterNSW’s finances were not put at risk by onerous dam projects.
“Whether it’s through [a] Commonwealth grant or whether it’s through monies made available by other means through the state, we will structure things for WaterNSW so that their credit rating is not put at risk.”
By Peter Hannam and Nick O'Malley